Peak oil closer than IEA forecasts show

LONDON (Reuters) - The world is closer to a peak in oil supply than International Energy Agency estimates admit, UK newspaper The Guardian reported in its Tuesday edition, citing an unidentified "whistleblower" at the IEA.

The IEA, which advises 28 industrialized countries on energy policy, is scheduled to release its World Energy Outlook on Tuesday. It 2008 Outlook forecasts world oil supply will rise to 106 million barrels per day in 2030.

"Many inside the organization believe that maintaining oil supplies at even 90 million to 95 million barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further," the Guardian quoted the IEA source as saying.

Fatih Birol, the IEA's chief economist, could not immediately be reached by Reuters for comment on the Guardian article, which appeared on the newspaper's front page.

While the Paris-based IEA has repeatedly warned that a lack of investment could lead to a strain on supply, it maintains that there is enough oil in the ground.

Its 2008 World Energy Outlook said global oil output was "not expected to peak before 2030."

The peak oil theory -- that supply has reached or will soon reach a high point and then fall -- has long been confined to the fringes of informed opinion within the industry.

There is also growing interest in peak demand, the view that oil supply will reach a high point because of policies to curb fuel use as part of efforts to counteract global warming, not a lack of supply.

Global oil demand is expected to advance 1 percent a year to 105 million barrels a day by 2030 from 85 million barrels a day in 2008, the adviser to 28 nations said today in its annual World Energy Outlook. The figure is below last yearâs 2030 estimate of 106 million barrels a day.

âThe global financial crisis and ensuing recession have had a dramatic impact on the outlook for energy markets,â the Paris-based agency said in its executive summary of the report. âWorld energy demand in aggregate has already plunged with the economic contraction.â

Governments have urged consumers to reduce energy consumption to lower carbon emissions and cut dependence on imported fuel. U.S. President Barack Obama last month announced $3.4 billion in grants to boost the efficiency of the countryâs power-transmission network. As demand growth slows, the world may still face a supply crunch and surging prices as the recession crimps investment in new projects, the agency said.

Climate-change legislation will also slow long-term crude oil demand, the IEA said. The United Nations will host delegates from 192 nations in Copenhagen next month to seek a new treaty on emission reductions for industrialized and developing economies.

Demand Growth Slows

Oil traded as low as $32.40 a barrel last December as a recession in major economies including Germany and the U.S. eroded demand. The IEA cut its five-year forecasts for global crude consumption in June, citing the economic slowdown. Demand wonât return to levels seen last year, when prices soared to $147.27, until 2012, the agency said at the time.

All the growth in oil demand through 2030 will come from developing economies, according to the IEA report. Consumption in the developed countries of the Organization for Economic Cooperation and Development will shrink during the period.

The IEA also reduced its forecast for global energy demand in 2030 to 16,800 million tons of oil equivalent from a previous estimate of 17,010 million tons. The agency sees consumption rising 40 percent from 2007 to 2030, or 1.5 percent a year. Last year, it had estimated that demand would rise 45 percent from 2006 to 2030, or 1.6 percent a year.

450 Scenario

The IEAâs forecasts are based on its âreference scenarioâ which assumes that governments make no changes to their existing energy policies and measures. The advisor also has a â450 scenarioâ whereby world governments take collective action to reduce the concentration of carbon dioxide and other greenhouse gases in the atmosphere to 450 parts per million.

Global oil consumption is likely to average 86.1 million barrels a day in 2010, the IEA said in an Oct. 9 monthly report, raising next yearâs forecast for a third consecutive month. The agency expects demand of 84.6 million barrels a day this year. The IEAâs next monthly report will be issued on Nov. 12.

It will be up to members of the Organization of Petroleum Exporting Countries to satisfy the bulk of the worldâs increasing need for oil as conventional production in countries outside the group peaks next year, the IEA said.

âMost of the increase in output would need to come from OPEC countries, which hold the bulk of remaining recoverable conventional oil resources,â the agency said in the report.

As well as sapping consumption, the global recession has crimped investment in new energy projects, potentially leading to a supply crunch and surging prices, âa few years down the line,â the IEA said.

Reduced Spending

âIn the oil and gas sector, most companies have announced cutbacks in capital spending, as well as project delays and cancellations, mainly as a result of lower cash flow,â according to the report. âOil sands projects in Canada account for the bulk of the suspended oil capacity.â

Global investment in oil and gas production has slumped 19 percent this year compared with 2008, a reduction of more than $90 billion, according to the IEAâs estimates.

Total SA said in September it may delay decisions on investment depending on terms offered by oil-service companies, which are hired to help with field development. Royal Dutch Shell Plc said last month that higher costs were limiting progress in oil sands projects in Canada.